UK Chancellor Reeves Abandons Income Tax Hike Amid Political Concerns

Chancellor Rachel Reeves has scrapped plans to increase income tax rates, reversing earlier indications that such a MOVE might be necessary to address the UK's budget deficit. The decision follows internal Labour Party concerns that breaking manifesto commitments could erode public trust. Economists had estimated the tax hike could generate up to £50 billion ($65 billion), but Reeves now favors alternative revenue-raising measures.

The shift reflects political calculations as much as fiscal ones. Reeves had previously warned that avoiding tax increases WOULD require deep cuts to capital spending—a move that could harm long-term productivity growth. However, party figures like Deputy Leader Lucy Powell argued strongly against reneging on election promises, fearing reputational damage.

Instead, the Treasury is assembling a package of smaller measures targeting approximately £30 billion ($39 billion). Potential options include new gambling duties and higher property taxes on luxury homes. The Office for Budget Responsibility has been briefed on these alternative plans ahead of the November 26 Budget announcement.